“Not My Problem?”: When Owners Get Personally Sued for Business Mistakes

By Jesse David Eisenberg, Esq. | JDE Law Firm, PLLC

Think your LLC or corporation shields you from liability? Think again. Business owners across New York and New Jersey are shocked every day when they’re personally named in lawsuits — even when the business is the one that signed the contract or made the call.

The assumption that you’re untouchable just because you formed an entity is dangerous — and increasingly wrong.

The Myth of Automatic Protection

It’s true that limited liability companies and corporations are designed to protect owners from personal exposure. But courts can and do “pierce the corporate veil” in cases where:

• The business is undercapitalized
• There’s commingling of personal and business assets
• The owner personally guaranteed a contract
• Fraud or deception was involved

That means your personal bank accounts, home, and other assets could be fair game — even if you acted in the name of your business.

3 Legal Theories That Can Drag You In Personally

1. Personal Guarantees

Did you sign a credit application, lease, or vendor agreement? Look closely. Many of these include hidden personal guarantees — especially in the fine print or on the signature page. That’s a direct path to personal liability.

2. Piercing the Corporate Veil

If your business isn’t treated like a true separate entity — for example, if you pay personal expenses from the business account, or never keep records — a court may decide it’s a sham. That opens you up to direct exposure.

3. Tort Claims (Fraud, Negligence, etc.)

Even if the contract is corporate, plaintiffs can sue owners individually for fraud, misrepresentation, or negligence. These claims are often added to pressure quick settlements — and sometimes, they succeed.

Signs You’re at Risk

• You’ve signed contracts personally or without noting your title
• Your LLC has little or no capital in the bank
• You frequently mix business and personal finances
• You made promises outside of your written agreements

If any of these sound familiar, you may be more vulnerable than you think.

What You Can Do

• 🛑 Stop signing contracts without review
• 🔍 Have an attorney examine your business structure — especially if you’re the sole member or shareholder
• 🧾 Keep business and personal assets completely separate
• 📞 Get legal counsel if you’re ever named individually in a lawsuit

You Built the Business — Don’t Let It Take You Down

Entity formation is a smart first step. But it’s not a shield you can ignore. Smart owners get in front of this — before someone sues them by name.

My business is to protect your business.